A tax agency supervisor accused of stealing millions of dollars from the state in bogus refunds and transfers helped create a computer program that was used in the alleged scam, prosecutors said.

Prosecutors say Michelle Cawthra, 30, stole up to $10 million by funneling fraudulent refunds and other payments to an acquaintance. They initially put the amount at $5.3 million but had said it was expected to rise.

Cawthra faces 27 state felony counts including violating the organized crime act, computer crime, theft, forgery, embezzlement and conspiracy. She is jailed under $10 million bail and has been placed on leave from her job at the state Revenue Department, where she worked for nine years.

She was formally advised of the charges against her Friday.

Prosecutors say Cawthra transferred fraudulent refunds and other payments into accounts controlled by Hysear Don Randell, 40. He was arrested on suspicion of theft and was being held under $10 million bail.

Arrest affidavits have given varying descriptions of Cawthra and Randell’s relationship. One described Randell as Cawthra’s boyfriend while another said Cawthra worked for Randell.

Cawthra worked on creating a computer accounting system for the Revenue Department known as Paperless History with Interfacing technoLogy, or PHIL, prosecutors said in court filings.

Richard Giardini, a department taxpayer supervisor, told investigators Cawthra “had a thorough knowledge of how (PHIL) worked,” according to the filings.

Investigators suspect the alleged thefts began in March 2006. Cawthra is accused of using PHIL and the names and computer passwords of two former state employees to pull off the fraudulent payments.

Investigators allege Cawthra generated and moved more than $80,000 in fraudulent tax refunds on April 18 to an account under the name of Andre Holliday, who owns an upscale clothing store in the trendy North Cherry Creek shopping district.

Holliday, 41, was arrested Saturday but released Wednesday after investigators said there was no evidence to contradict his assertion that he was innocent.

Holliday was a friend of Randell’s and told investigators Cawthra had done tax work for him.

“We could find that (Holliday) is a witness or a victim,” said Lynn Kimbrough, a spokeswoman for Denver prosecutors.

Holliday declined to say Thursday whether he would pursue a wrongful-arrest suit.

“My innocence is most important and that was proven,” Holliday said.

Revenue Department officials said they are looking into how the thefts occurred.

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